Your home office will qualify as your principal place of business if you use it exclusively and regularly for administrative activities and you have no other fixed location where you conduct substantial administrative activities. For example, you cannot claim a home office deduction if you occasionally work from home, but otherwise have an office at your employer’s place of business. Since the passage of the Tax Cuts and Jobs Act of 2017, you must be self-employed (or an independent contractor) to claim a deduction for your home office.
However, you may also have two work locations, an office outside the home and an office inside the home provided you perform substantially all your administrative activities in your home office. For example, you are a landscaper with a shop. Your shop has a desk and a phone, but you perform substantially all your administrative activities for your landscaping business from your home office, both work locations count.
Administrative activities include performing bookkeeping, speaking to your tax accountant, employment issues, paying bills, etc.
Aside from exclusively, home offices must also be used regularly. Using a home office one day a week for your small business, for example, will typically not qualify as regularly used. Also, the IRS has now established a safe harbor provision for Home Office Deductions – we will explore this on a case by case basis since there are many pitfalls.
Spoiler Alert – Home offices are not huge tax deductions. The biggest expenses such as mortgage interest and real estate taxes are already being deducted on your tax returns. Home offices will put about $100 in most taxpayer’s pockets. Not huge, but worth a dinner or two. Or 20 footlongs at Subway.
This Home Office Deduction Worksheet form is also available as a fill-able and save-able PDF. Super easy to complete and upload to us!